UK’s living wage gets a boost

Category:
Money

Updated:
04/11/2014
First Published:
04/11/2014

MONEYFACTS ARCHIVE

This article was correct at the time of publication. It is now over 6 months
old so the content may be out of date.

For those on low incomes, it can be difficult to make ends meet. The national minimum wage invariably doesn't cover the basic costs of living, with many workers forced to claim additional benefits to ensure they can meet their financial obligations. That's why the "living wage" is so widely welcomed – and why it's even better news that it's increased.

The living wage is a voluntary hourly rate, based on the amount needed to cover the basic cost of living – so in theory, it should be enough for workers to comfortably live on – and as the cost of meeting even basic financial obligations is rising, so too has the living wage. Yesterday it officially got a 20p boost, rising from £7.65/hour to £7.85/hour. The rate paid in London is higher, accounting for the increased costs associated with London living, and has risen from £8.80 to £9.15 per hour.

The living wage (excluding London) is now a full 21% higher than the compulsory National Minimum Wage of £6.50, and happily, it's been adopted by over 1,000 employers across the UK. More are joining the voluntary scheme all the time – the number of firms paying this wage has more than doubled in the past year – ensuring that their workers can comfortably meet the basic costs of living.

The increased rate has been welcomed by trade unions and employee organisations, but a report released from KPMG – coinciding with Living Wage Week – shows that 22% of workers are still earning less than the living wage, up from 21% a year ago. Part-time workers are suffering the most, with 43% earning less than the threshold, compared with 13% of full-time employees.

"Far too many UK employees are stuck in the spiral of low pay," said Mike Kelly, head of living wage at KPMG. "With the cost of living still high, the squeeze on household finances remains acute, meaning that the reality for many is that they are forced to live hand to mouth."

There's clearly still a long way to go, but it's hoped that more firms will adopt the living wage initiative to help employees live more comfortably, and that Living Wage Week, which runs until Saturday, will highlight the importance of it.

What next?

If you're struggling to make ends meet, see if you can lower your bills:

How many have better budgeting as their New Year’s resolution? As with many things, these skills are best learned when young, so Lemonade Money has come up with some tips to help parents make their children more financially savvy.

Money worries are putting Christmas at risk for up to five million Brits, with 10% saying they regularly worry about money in the lead up to Christmas, and the same proportion feeling stressed about how much they are spending.